So you find yourself with a little bit of extra money - perhaps due to a
raise, an inheritance or an unexpected windfall?

Should you put all of your money toward paying down the mortgage on your
home? Or would you be better off placing your extra cash into a savings
account?

Deciding whether to pay down your mortgage or add to your savings is a
complex choice and it depends on a number of factors in your personal
financial situation.

Here are some of the things that you will need to consider when making the
decision:

How Much Are Your Savings Earning?

Take a look at the savings accounts where you are keeping your money and
assess the interest that your savings are earning. Is your money earning
more in savings than you would save by paying down your mortgage earlier?

Does Your Mortgage Have Overpayment Penalties?

Some mortgage lenders will charge you a fee if you try to repay your
mortgage earlier than the agreed upon term. Check with your lender to find
out and calculate whether the extra costs will outweigh the benefits you
get from overpaying your mortgage. If they do, put your windfall in savings
instead.

What are Your Other Debts?

It doesn't make sense to be overpaying on your mortgage if you have a lot
of credit card debt that is charging you an enormous amount in interest.
Prioritize your high-interest debt first before you think about overpaying
on your mortgage.

Do You Have An Emergency Fund?

You should always have an emergency fund in cash that will protect you from
having to use expensive credit card debt if an unexpected payment comes up
such as a burst pipe or a flat tire on your car or if you lose your job.

A good rule is to have the equivalent of three to six months of savings in
a bank account just in case you need it. This is a first priority and only
when you have this emergency fund established should you consider
overpaying on your mortgage.

These are just a few of the important factors that you should consider when
deciding whether to overpay the mortgage on your home or place the money in
savings. For more information, give us a call today!